If you took the second loan in the last days of the year, you can determine the average loan balance for the year using the average of the monthly statements method allowed by the IRS. You can do this by taking the Outstanding Mortgage Principal reported in Box 2, multiplying it by the number of months you carried the loan, and dividing that number by 12. You can report this calculated amount as the outstanding mortgage principal in Box 2, then when TurboTax asks what the balance was as of January 1, 2022, you will enter the calculated amount again for this loan.
You can enter the first loan as it is reported on Form 1098 since you carried this one all year. TurboTax will calculate the average balance on this loan using the first and last month's balance, another method approved by the IRS. It will then use the average balance from both loans to correctly apply the mortgage interest limit to determine your deductible interest.
